What Happened On “Liberation Day”?

On April 2, Trump escalated the trade war by adding a blanket 10% tariff on all goods imported from other countries, on top of the 25% tariffs he imposed on Canada and Mexico back in March. It includes a 20% tariff on all products from the European Union, and up to 40% tariffs on many countries in Asia. He has promised to retaliate against any country that implements tariffs on U.S. exports, potentially kicking off an escalating trade war that could tip the global economy into a recession.

What Are Tariffs?

Tariffs are a tax on products imported from other countries. Tariffs are designed to make imported goods more expensive. But, because U.S. importers still need to make a profit for their executives and shareholders, they pass any increased shipping costs onto workers in the form of higher prices or by finding ways to cut labor costs through automation or layoffs. 

Who Pays For Tariffs?

Working-class people will pay the price of Trump’s tariffs through price inflation, disruptions to supply chains and job losses. Core inflation has steadily increased from 2.2% in February 2024 to 3.1%. One in six Americans are already “food insecure,” and tariffs on imported produce like tomatoes, cucumbers and bell peppers are expected to raise grocery prices by 3%. Gas prices are expected to rise 20 to 40 cents per gallon. Tariffs on building materials like lumber from Canada and gypsum from Mexico could raise the price of building a home by $10,000. Auto industry analysts are warning of 25% price increases on new cars, or as much as an added $5,000 to $15,000 per vehicle.

Working-class people around the world will also pay a heavy price for Trump’s actions. Massive U.S. tariffs for countries like Vietnam that depend on exporting goods to the U.S. could mean the total devastation for millions of people, as corporations cut costs and lay off workers.

Why Is Trump Doing This?

Starting in the 1980s and 90s, U.S. billionaires and corporations shut down thousands of American factories and moved production to countries where they could pay lower wages and make huge profits. The U.S. went from being the “workshop of the world” to importing the majority of consumer goods from other countries. Trump thinks he can reverse this process and force U.S. manufacturing to move back home, and thereby gain a more decisive advantage over China. 

Theoretically, tariffs could incentivize capitalists to move production back to the U.S. if they find that it’s too expensive to export their products to the U.S. market from the outside. But it’s not at all automatic that this works out the way Trump wants. For starters, to build factories or plants with the advanced technological capabilities necessary to compete with China would require at least ten years or more of construction and assembly. That also means millions, or more likely billions, of dollars of up-front investment from capitalists who would generally rather make a much faster and relatively less risky profit by gambling on the stock market. Supply chains today are incredibly complex and not at all easy to move around on a whim. With Trump, no one knows what U.S. trade policy will look like two hours from now, much less in four years. Entire industries are not likely to put hundreds of billions on the line if they have no guarantee of what the political situation might look like before their factories are even finished being built.

Will There Be A Recession?

There are clear signs that a recession is already starting. Many bourgeois economists believe these tariffs will severely hurt the U.S. economy. On April 3, one day after “Liberation Day,” the U.S. stock market saw its sharpest drop since 2020. Major stock indexes dropped as much as 6%. The billionaires who thought Trump’s most important advisor was the stock market have now sobered up. $3.1 trillion dollars have evaporated from the stock exchange, erasing all the gains following Trump’s election. Wall Street was further frustrated when Trump seemed to accept a recession as a necessary “period of transition.” They were shocked when their trusted man-on-the-inside, Howard Lutnick, doubled down and called for new measurements of GDP that separated public and private spending to paint a rosy picture, a scheme that can be expected in authoritarian regimes, not the heart of global capitalism.

Consumer spending has also seen the biggest drop since the fall of 2021. Retail sales are down 1%. Major corporations like Target, Walmart and McDonalds are all reducing profit forecasts for 2025. Delta Airlines has slashed its profit forecast in half, and American Airlines revised its forecast from 5% profits down to just breaking even in 2025. A recession in the U.S. would mean layoffs and serious hardship for millions of families, and would likely impact the working class and poor around the world.

Should Unions Support “America First”?

No, but unfortunately some labor leaders have promoted the idea that American workers and American bosses are on the same side against foreign competitors (namely, China) and that policies protecting the profits of American bosses are good for the U.S. worker. Last year in July, the president of 1.3 million Teamsters, Sean O’Brien, spoke at the Republican National Convention. In that speech, he said that “we need trade policies that put America first.” In response to Trump’s “Liberation Day” announcement, Shawn Fain said he hoped tariffs would incentivize auto companies to bring back jobs. 

Even if Trump’s tariffs brought back some American manufacturing (although, like we explain above, this is pretty unlikely), what do Fain and O’Brien think will happen? That the bosses will reopen factories and welcome unions and good wages with open arms? In reality, corporations will use the same “America First” rhetoric to try to force American workers to “sacrifice” and accept low wages to make up for all the money big corporations are spending to reshore production to the U.S. The bosses will fight tooth and nail against unions at these new factories and they will do everything possible to drive down wages to increase their profits. 

Workers in the U.S. have much more in common with other workers internationally than we do with our exploitative bosses at home. We need international working-class solidarity in the labor movement, not labor leaders who repeat the bosses’ talking points.

What Happened During The Last Major “Trade War”?

During the Great Depression, the capitalist classes internationally turned to protectionism to defend their profits and national interests, ultimately making the economic crisis much worse and paving the way for World War II. In 1929, U.S. tariffs stood at 40%, and protectionist policies were contagious. The German ruling class turned to Hitler to save capitalism in the midst of economic collapse and after repeated attempts at socialist revolution by the working class. In 1931, the British ruling class launched “imperial preference,” a free-trade agreement only between its current and former colonies. The Dutch ruling class did the same thing in Indonesia and the South Pacific. Japanese capitalism needed raw materials from the Dutch colonies one way or another, so the impact of tariffs was to strengthen the power of warmongers in Japan. 

So What’s The Answer, According To Socialists?

When politicians say things like “looking out for America first,” they mean “looking out for the profits of American corporations.” We oppose protectionism and trade wars, which are a step toward all-out war. But we also oppose free trade deals, which are just another way for corporations in dominant imperialist countries to enrich themselves at the expense of working people around the world. Tariffs and free trade are two sides of the same coin: two versions of the capitalist system which is fundamentally based on exploiting workers and the environment for profit.

Unions need to fight back against Trump’s trade war on an independent, working-class basis. If the bosses try to close down a factory, workers should occupy the workplace and run it democratically. Strikes and workplace action will be necessary to prevent layoffs like the ones already announced at Stellantis, which will affect UAW workers. Unions and consumer groups should monitor prices to make sure corporations aren’t price-gouging.

Making life better for the vast majority of working people won’t happen through tariffs, but by taxing the billionaires and the top 500 corporations to fund good union jobs, free healthcare, and high-quality affordable housing. But we also need an entirely new system to fundamentally fix the problems working people face that Trump falsely claims he’s going to solve. Socialists call for a democratically-planned economy on a global scale, where goods are produced and distributed to meet everyone’s needs rather than to make billionaires richer.